Should the insurance industry be banking on risk escalation for solvency II?
Basel II introduced a three pillar approach which concentrated upon new capital ratios (Pillar I), new supervisory procedures (Pillar II) and demanded better overall disclosure to ensure effective market discipline and transparency. Importantly, it introduced operational risk as a standalone area of...
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| Format: | Article |
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Elsevier
2016
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| Online Access: | https://eprints.nottingham.ac.uk/33713/ |
| _version_ | 1848794687534530560 |
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| author | Bryce, Cormac Webb, Robert Cheevers, Carly Ring, P. Clark, G. |
| author_facet | Bryce, Cormac Webb, Robert Cheevers, Carly Ring, P. Clark, G. |
| author_sort | Bryce, Cormac |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | Basel II introduced a three pillar approach which concentrated upon new capital ratios (Pillar I), new supervisory procedures (Pillar II) and demanded better overall disclosure to ensure effective market discipline and transparency. Importantly, it introduced operational risk as a standalone area of the bank which for the first time was required to be measured, managed and capital allocated to calculated operational risks. Concurrently, Solvency II regulation in the insurance industry was also re-imagining regulations within the insurance industry and also developing operational risk measures. Given that Basel II was first published in 2004 and Solvency II was set to go live in January 2014. This paper analyses the strategic challenges of Basel II in the UK banking sector and then uses the results to inform a survey of a major UK insurance provider. We report that the effectiveness of Basel II was based around: the reliance upon people for effective decision making; the importance of good training for empowerment of staff; the importance of Board level engagement; and an individual's own world view and perceptions influenced the adoption of an organizational risk culture. We then take the findings to inform a survey utilizing structural equation modelling to analyze risk reporting and escalation in a large UK insurance company. The results indicate that attitude and uncertainty significantly affect individual's intention to escalate operational risk and that if not recognized by insurance companies and regulators will hinder the effectiveness of Solvency II implementation. |
| first_indexed | 2025-11-14T19:20:09Z |
| format | Article |
| id | nottingham-33713 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:20:09Z |
| publishDate | 2016 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-337132020-05-04T17:53:41Z https://eprints.nottingham.ac.uk/33713/ Should the insurance industry be banking on risk escalation for solvency II? Bryce, Cormac Webb, Robert Cheevers, Carly Ring, P. Clark, G. Basel II introduced a three pillar approach which concentrated upon new capital ratios (Pillar I), new supervisory procedures (Pillar II) and demanded better overall disclosure to ensure effective market discipline and transparency. Importantly, it introduced operational risk as a standalone area of the bank which for the first time was required to be measured, managed and capital allocated to calculated operational risks. Concurrently, Solvency II regulation in the insurance industry was also re-imagining regulations within the insurance industry and also developing operational risk measures. Given that Basel II was first published in 2004 and Solvency II was set to go live in January 2014. This paper analyses the strategic challenges of Basel II in the UK banking sector and then uses the results to inform a survey of a major UK insurance provider. We report that the effectiveness of Basel II was based around: the reliance upon people for effective decision making; the importance of good training for empowerment of staff; the importance of Board level engagement; and an individual's own world view and perceptions influenced the adoption of an organizational risk culture. We then take the findings to inform a survey utilizing structural equation modelling to analyze risk reporting and escalation in a large UK insurance company. The results indicate that attitude and uncertainty significantly affect individual's intention to escalate operational risk and that if not recognized by insurance companies and regulators will hinder the effectiveness of Solvency II implementation. Elsevier 2016-07-01 Article PeerReviewed Bryce, Cormac, Webb, Robert, Cheevers, Carly, Ring, P. and Clark, G. (2016) Should the insurance industry be banking on risk escalation for solvency II? International Review of Financial Analysis, 46 . pp. 131-139. ISSN 1057-5219 Operational risk; Risk escalation; Risk regulation; Basel II; Solvency II http://www.sciencedirect.com/science/article/pii/S1057521916300758 doi:10.1016/j.irfa.2016.04.014 doi:10.1016/j.irfa.2016.04.014 |
| spellingShingle | Operational risk; Risk escalation; Risk regulation; Basel II; Solvency II Bryce, Cormac Webb, Robert Cheevers, Carly Ring, P. Clark, G. Should the insurance industry be banking on risk escalation for solvency II? |
| title | Should the insurance industry be banking on risk escalation for solvency II? |
| title_full | Should the insurance industry be banking on risk escalation for solvency II? |
| title_fullStr | Should the insurance industry be banking on risk escalation for solvency II? |
| title_full_unstemmed | Should the insurance industry be banking on risk escalation for solvency II? |
| title_short | Should the insurance industry be banking on risk escalation for solvency II? |
| title_sort | should the insurance industry be banking on risk escalation for solvency ii? |
| topic | Operational risk; Risk escalation; Risk regulation; Basel II; Solvency II |
| url | https://eprints.nottingham.ac.uk/33713/ https://eprints.nottingham.ac.uk/33713/ https://eprints.nottingham.ac.uk/33713/ |